Q3 2022 Glatfelter Corp Earnings Call
Please standby good day.
Welcome to the Q3 2022 that's helped her earnings conference call. Today's conference is being recorded at this time I would like to turn the conference over to release.
Pretty Gladfelter. Please go ahead Sir.
Thank you Sarah.
Good morning, and welcome to Blackstone's first 2022 third quarter earnings Conference call.
As Rob <unk>, Senior Vice President Chief Financial Officer, and Treasurer on the call to present, our third quarter results with me today is Thomas Bateman, our new President and Chief Executive Officer.
Before we begin our presentation I have a few standard reminders.
During our call. This morning, we will use the term adjusted earnings as well as other non-GAAP financial measures.
A reconciliation of these financial measures to our GAAP based results is included in today's earnings release and in the Investor slides.
We will also make forward looking statements today that are subject to risks and uncertainties.
Our 2021 Form 10-K, and our periodic quarterly reports filed with the SEC and todays release, which are all available on our website disclose factors that could cause our actual results to differ materially from these forward looking statements.
These statements speak only as of today and we undertake no obligation to update them.
I will now turn the call over to Thomas.
Hello, everyone and welcome to our third quarter Conference call.
This is my first conference call as clubs had a C O and it is a pleasure to be with you today.
With the benefit of having worked at that filled up for two months. It's an opportune time for me to share my assessment of the business and the steps we are taking to return to profitability.
Since joining the company I've been spending time meeting with customers and investors visiting our manufacturing sites and engaging with our extended leadership team.
The insights I have gained in my early tenure will be the focus of my remarks today.
And Ramesh will report on our third quarter performance.
There are three key takeaways from today's call.
Yes.
Rising inflation in energy prices have had a severely negative impact on our business.
Balanced to sit and our operating environment remains difficult, especially in Europe .
Despite all these challenges the LR segment continued to perform well and composite fibers is showing encouraging signs of improvement.
Second.
The underlying fundamentals of our business are strong the strategy is sound and classifieds are remains competitively positioned to serve our global customers and attractive growth market. Despite current challenges and third.
Our turnaround plan is simple achievable and already well underway.
Our goal is to return us to profitability strengthen our ability to navigate economic headwinds and position the company for profitable long term growth.
The plan is comprised of six initiatives aimed at optimizing our portfolio.
Operations.
And our capital to stockpile, which.
Which we are seeing early signs of progress that has already helped to contribute to our Q3 performance.
The bottom line collapsed.
Glad to say that it's capable of far more than it is delivering today.
And this is precisely the opportunity that attracted me to Clapped-out, though.
I've spent the best part of 20 years, leading various companies in different industries through a major change.
And I'm applying that experience to lead our turnaround efforts.
Bring us familiarity with the industry, having spent many years, leading similar call it consumer driven industrial business focused on engineered materials and manufacturing.
Of course, I also bring a deep understanding of the international markets, which is particularly helpful. Given klasfeld us operating footprint and global reach.
I'm spending time individually and collectively with our leaders.
Traveling to our facilities and walking the shop floor.
I've seen firsthand that our people continue to be guided by shared values. Despite the many challenges facing the business.
There is a strong degree up integrity and respect and the desire to contribute to a customer focused socially and environmentally responsible organization.
Our culture is strong the executive team is both capable and committed and together. This is an excellent foundation from which to drive change.
The day I walk in the door I knew this business had been hit hard by inflation and rising energy prices.
The ongoing conflict between Russia, and the Ukraine.
Today with the benefit of seeing the company from the inside I have a much deeper appreciation for how challenging market and macro conditions have been and frankly, we'll continue to be for some time and most importantly immediate actions need to be implemented.
While there may be some optimism around energy pricing relief, the macroeconomic environment, especially in Europe will undoubtedly continue to create near term volatility and headwinds for our business.
I see a compelling investment thesis for this company.
The past two months have served to reinforce this view.
It is clear the company has a solid strategy built on competitive positioning.
Novartis and quality products and a strong customer relationship of all which contributes to its market position as a leading global supplier of engineered materials I have met with our top customers.
And I'm impressed by the spirit of collaboration and partnership Glatfelter has established with them.
Ah witness the specialized manufacturing technologies and techniques, we are employing throughout our three segments to serve our customers.
And it's evident that our products are essential to everyday life, regardless of where we are in the economic cycle.
The issue, we now need to address to improve our performance is not our market positioning and its not our overall company strategy. The problem is rooted in aspects of execution, which our turnaround plan will address.
After you hear from Ramesh.
Provides additional details on the turnaround strategy Ramesh.
Thank you Thomas Slide.
Slide three of the Investor presentation provides the highlights of our third quarter performance.
The GAAP EPS loss of $1.10 was driven primarily by the impairment charge, we took in the spun laced segment.
Despite continued inflation and challenging economic backdrop.
Adjusted EBITDA was $26 $3 million and close to our previous guidance of $27 million.
Supporting this performance was a record quarter for our air led materials segment on operating profit and EBITDA.
Composite fibers also delivered results slightly above expectations.
However, spun laced with significantly below expectations, driven by the widening price cost gap and lower shipments.
Slide four shows a bridge from adjusted EPS of <unk> 21 cents in the third quarter of last year to a loss of 10 cents in the third quarter of this year.
Composite fibers results improved earnings by one cent as higher selling prices lower depreciation from the Dresden impairment and favorable currency and related hedging more than offset the inflationary pressures and volume decline from EU sanctions.
<unk> materials results increased earnings by <unk>, <unk>, primarily due to the segment's ability to effectively pass through inflation to customers, coupled with favorable mix and strong operations supported by the higher demand in North America.
But unless results lowered earnings by <unk> <unk> as a result of input cost inflation that outpaced price increases.
Lower than expected volume and a higher cost of production due to elevated waste rates inefficiencies and labor shortages in the U S.
To note spun laced was not in our results for Q3 2021 as the acquisition had closed at the end of October of last year.
Corporate costs were <unk>, <unk> unfavorable driven by relatively higher spending and travel versus last year, but in line with guidance and pre COVID-19 levels.
Interest expense lowered earnings by <unk> with the issuance of a new bond to finance two acquisitions.
And taxes and other items were 17 unfavorable mainly due to a valuation allowance of $5 $2 million related to our spun laced operations in <unk>, France.
Slide five shows a summary of third quarter results for early materials.
Revenues were up 18% on a constant currency basis versus the same prior year period, mainly driven by higher selling prices of approximately $23 million stemming from contractual cost pass throughs as well as price increases initiated for customers without such arrangements.
Volume was lower by 4% year over year, mainly driven by weaker tabletop and home care shipments, although sequential volume was up 3%.
Operations were favorable by $1 $4 million driven by higher production in our North American sites to meet strong customer demand.
Foreign exchange was unfavorable by $2 $6 million, resulting from the weakening of the euro.
For the fourth quarter of 2022, we expect a continuation of higher selling prices to offset inflation given the effective cost pass through mechanisms we have in place.
Volume is expected to be 2% to 3% lower reflecting normal seasonality in the fourth quarter and unfavorably impacting results by $1 million to $2 million by $1 million.
Operations is expected to be in line with the third quarter.
Slide six shows a summary of third quarter results for the composite fiber segment.
Total revenues were up 5% on a constant currency basis, despite volume being lower by 24% versus the same quarter last year.
The revenue increase was mainly due to higher selling prices of approximately $23 million as we have successfully converted approximately 55% of the revenue base to a floating price mechanism, coupled with multiple pricing actions and energy surcharges taken in 2022 to offset inflation.
Laura wall cover shipments of 54% accounted for over 80% of the revenue decline year over year as this product category was the most impacted by EU sanctions.
Lower volume overall unfavorably impacted results by $2 7 million.
Continued escalation in the price of energy key raw materials, and freight lowered earnings by $24 $3 million versus the same quarter last year.
Operations and other were favorable $1 $8 million driven by reduced overall spending and lower depreciation following the Dresden impairment taken in the second quarter.
Foreign exchange was favorable $3 $3 million from the weakening of the British pound, creating a benefit in our UK manufacturing cost footprint and currency hedging gains.
Overall, the pricing and cost mitigation actions taken in the composite fiber segment are aiding its turnaround and our goal to bring the segment's profit margins back to pre pandemic levels.
Looking ahead to the fourth quarter of 2022, we expect selling prices to fully offset higher raw material and energy prices.
Volume is projected to be about 3% higher and when combined with better mix is expected to favorably impact results by approximately $1 million.
Slide seven shows a summary of third quarter results for the spun laced segment.
Revenues were approximately $89 million, while shipments were 9% lower than prior quarter and below our expectations.
The decline in volume was mainly driven by labor shortages in our U S sites impacting production combined with lower shipments from our European sites related to weaker demand.
This together unfavorably impacted results by $2 $7 million when compared to Q2.
Selling prices and energy surcharges favorably impacted results by $2 $9 million, but were more than offset by continued raw material inflation and higher energy costs.
And our European sites combined totaling $7 million.
Operations FX and other items were a net $4 million favorable mainly driven by integration cost reduction efforts lower energy consumption and overall lower spending.
For the fourth quarter of 2022, we expect higher selling prices to offset raw material and energy inflation.
Volume is expected to be 10% to 15% lower driven by reaction from price sensitive customers through our recent price increases unfavorably impacting operating profit by approximately $1 million to $2 million as.
As a result, we expect an operating loss of approximately $6 million for the quarter.
Slide eight shows corporate costs and other financial items.
For the quarter corporate costs were higher by $1 $5 million versus the same period last year, mainly due to relatively lower legal travel and corporate spend.
For the full year corporate costs are estimated to be approximately $24 million in.
In line with our previous guidance.
We expect full year interest and other financing costs to be approximately $39 million.
4 million higher than our previous guidance. This increase is driven by higher vendor financing costs that are tied to interest rates in the U S and Europe and also due to foreign exchange devaluation in the euro and the ruble.
Slide nine shows our cash flow summary.
On a year to date basis, our 2022 adjusted free cash flow was lower by approximately $119 million versus the same period last year, primarily driven by higher working capital usage of $62 million.
Working capital usage was driven by multiple factors, including the termination of our U S spun laced factoring program.
Elevated accounts receivable due to price increases and higher inventory values due to inflation and raw materials and energy.
Lower earnings negatively impacted cash by $17 million and higher capital expenditures added $12 million through the cash usage.
Other contributing factors were higher taxes and interest paid.
We expect capital expenditures for 2022, including spun laced in Mount Holly to be between 35% and $40 million.
This is $10 million lower than our previous guidance and further highlights our continued discipline around capital allocation.
Depreciation and amortization expense is projected to be approximately $66 million or $2 million below our previous guidance driven by lower capital spending and a weaker euro.
And finally, we expect enterprise EBITDA for the fourth quarter to be between 23 and $26 million.
Slide 10 shows some balance sheet and liquidity metrics.
Our bank Covenant leverage ratio increased to five seven times as of September 30 versus five three times as of June 30, due to weak spun laced earnings.
Our available liquidity at the end of Q3 was approximately $127 million and our near term focus continues to be on earnings growth cash flow generation and delevering of the balance sheet.
This concludes my prepared remarks, I will now turn the call back to Thomas.
Thank you Ramesh now for an overview of our turnaround strategy.
On Slide 11, you can see our six areas of focus for us.
First portfolio optimization.
Second margin improvement.
Fixed cost reduction.
Cash liberation.
Operational effectiveness and six returning spun laced to profitability.
Starting with portfolio optimization, we're looking at every part of our portfolio and considering the strategic and financial value of each asset for the near and long term.
I have the benefit of looking at everything with fresh eyes, and together with the team we are assessing how to optimize the assets we own currently to ensure we move forward with only those assets that align with glatfelter strength.
We intend to invest our time and resources in the areas of our portfolio that have scale or the potential for scale.
Our strong market, leading position and where we have a core competency in the manufacturing technology.
Our Allied business is a great example of how we have used these elements to drive improved performance and EBITDA contributions.
The <unk> segment serves as an indication of what is possible as we apply this same focus to other areas of our portfolio.
Also we will be looking at the best way to address the assets that are noncore.
We will focus on those that like either a significant share of market and scalability or those that do not have a unique differentiator that will allow us to compete profitably in a particular product category.
<unk> is an important consideration in this assessment.
If we are too small it is not going to be.
It's going to be very hard for us to compete profitably on a global scale.
And of course, we will consider the potential for future EBITDA contribution, but this is just one of many important factors.
We are continuously assessing our portfolio and we believe there are opportunities to divest noncore assets that may enable us to pay down debt reduce leverage and reset our focus on our core business.
Turning to margin improvement.
This is a fundamental part of our turnaround strategy.
We will place greater focus on profitability, rather than simply topline growth.
As we make this shift we can expect that volumes will soften in the short term there is no way around this and it's critical first step on the path to improved EBITDA.
Our margin improvement efforts will focus on closing the gaps between price and cost. The team has communicated to every customer and is making good progress addressing input cost inflation.
Everywhere, we have had the opportunity to increase our prices we have done it and it has largely been accepted by our customers who value our products and recognize the economic constraints and which we are operating.
As inflationary pressure continues we are confident that we would be able to price competitively at a productive rate and drive our profitability back to pre COVID-19 levels.
While rising input prices were the main driver for compressed margins.
Our fixed cost base also presents opportunities to improve margins.
Like all businesses and the current economic environment, we are evaluating the potential for cost savings across the business, which.
Which is the third initiative of our turnaround plan.
As we move to a leaner cost base, we will not risk jeopardizing safety product quality or investments in our people.
With that said, we conducted a bottom up review of our sales and general administrative resources and based on our analysis. We are implementing changes that will generate full year run rate savings in the range of $9 million to $10 million by 'twenty 'twenty four.
Now for our fourth initiative cash liberation.
Clearly, we need to pay down debt.
Decrease our leverage and increase EBITDA.
This will require prudent decision, making with respect to capital allocation and a disciplined approach to managing our accounts receivables.
Finished goods inventory and raw material pricing.
To that end, we're also tightly controlling our capital spending, which we expect to be $35 million to $40 million a significant reduction from where we operated previously.
In addition, the board has already acted to suspend the dividend, which will free up approximately $25 million of cash annually.
We are supporting this by actions to improve cash flow across the business.
And through the portfolio optimization initiatives I referred to earlier.
Turning to initiative number five.
Operational effectiveness.
Our approach will be largely informed by six Sigma principles.
We do not have the luxury of time to adopt the full six sigma overhaul of the business, but we can still benefit from the approach and discipline that comes with a six Sigma culture, which I have implemented successfully in the past.
We have already started to identify where processes are falling short.
Where excess waste can be eliminated and ways that we can further drive continuous quality improvement and customer focus.
I'm confident that in doing so we can bring all areas of the business up to the operational standards that are in place in our legacy <unk> business.
And it is a great example, because it demonstrates demonstrates what platform that can do in terms of operational improvements and implementation of best practices.
We need to leverage these capabilities by benchmarking kpis to achieve operational excellence throughout our organization.
The area that is most pronounced for needing to drive efficiency excellence and customer focus is our stainless business the six initiatives in our turnaround plan.
While each of the other five elements of our turnaround plan also apply to spun lace. We are highlighting a separate initiative given the intensity and urgency with which we are tackling the segment's underperformance and overall challenges.
As an investor I am sure you are likely looking for me to provide my perspective on the value of the spun this acquisition and whether it was a good decision to acquire this business.
From a strategic perspective, the spun this business is a logical addition to our business portfolio.
Among other things panelist at the branded business to the portfolio and gives us access to a very good manufacturing technology in nonwovens that nicely complements our elas and composite fibers businesses.
<unk> there are a lot of challenges spun laced it's not cost competitive currently and we are not able to pass through raw material and energy input cost as effectively as we can with allied and composite fibers.
Overall, the work ahead of us and spun this is more than was originally anticipated.
The segment's performance to date.
Along with the impairment charge, we have taken on this asset is a clear indication that this acquisition is not what the company first thought it could be.
I believe the team has a good understanding of what is needed to stabilize the spun this business to return to profitability.
We will address the cost base and optimize outputs. So we can meet customer demand.
This isn't a new message for you, but it's changing under my leadership is the speed of execution and the level of accountability.
We have changed the reporting structure with the leadership of our panelist business report directly into me.
The team is supported with the resources needed to execute the turnaround and to make informed decisions quickly.
By ensuring clear accountability.
And instilling the need for action.
It will be better equipped to deliver on the work required to bring the operations up to our standards, but using.
Using by using the same methodology and rigor as in our airlift business.
I am confident we can return the segment to profitability, which is an immediate priority.
It will not be an easy or quick fix but we will absolutely get there.
The potential for longer term EBITDA growth remains an open issue.
That will give you an update on our progress when we report our Q4 results.
Now the related questions, how long will it take to deliver the overall turnaround plan and what will the impact be.
On timing I'm optimistic we will start to see an improvement in our performance within the first half of 2023 and.
And we will generate quarter to quarter improvement throughout next year.
Of course, our success in the coming months is also determined in part by the ongoing volatility of market conditions, including the looming recession in Europe .
And whether there will be any lasting relief from energy pricing.
As I said at the start of the call.
We remain focused on the factors within our control.
In terms of the timeline to execute our turnaround this will be our focus from now through all of 2023.
Regarding potential impact and upsides, the entire management team and I are confident that platform that can deliver significant value creation upside in annual EBITDA at levels much higher than where they are today.
At this early stage of the turnaround and considering the market uncertainty it.
It is premature to speculate beyond that we.
We are confident we will perform within the guidance range of $23 million to $26 million for the fourth quarter of 2022 and that will be eight and that we will be able to deliver ongoing improvements from this point forward.
To conclude today's call.
Im encouraged by the prospects of this business and that we have the right talent and resources in place to execute against our turnaround strategy.
Im committed to lead that fell out to the next level of performance and I am confident it is well within our reach.
I look forward to reporting back to you on our progress and with that I will turn the call over for questions.
Okay.
Thank you.
To ask a question. Please take note by pressing star one on your telephone keypad.
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Ask a question, we'll pause for just a brief moment tomorrow.
<unk> to signal for questions.
Kim we'll take our question from Mitra.
Paul with Sidoti.
Yes, good morning, Thanks for taking the questions and Thomas Thanks.
For the color and detail around the initiatives for the turnaround strategy.
First I just want to.
Get a sense you sound very confident that starting next year, we should start to see.
Results and.
As we were heading into.
Actual recession.
And again given the existing issue is already out there in terms of labor shortage as raw material costs energy pressures et cetera, and a component that the potential slowdown in consumer demand.
Just wondering what gives you the confidence that you will be able to start showing improvement.
Yes Mitra. Thank you for the question.
Number one I mean, we are focusing on the issues, we can control and and we're very confident that this will be implemented as soon as possible what we're seeing in the marketplace and youre right.
<unk> is probably heading into a recession, but on the other hand, our product portfolio with pretty strong if I look at our <unk> business and our composite fiber business.
We feel pretty good about that consumers will need these products and if I look at our turnaround plan and the improvements we will implement over the next.
Three to six months.
Showed significant improvement in our cost base and and again as I mentioned before.
We are looking at the overall economic situation and we are hoping that we might get a little bit of tailwind.
But we are still very very confident that we can.
Can really based on the things we can control that we can improve our performance.
Early signs and what we're hearing right now from the European side is that the energy situation will be hopefully improve next year.
Germany for example has now really implemented the gas cap.
Price cap for power and gas so that will tremendously help us.
So overall, we are very optimistic that we can actually get to number one the things we can control ourselves under control and then with the energy price situation, which is still very difficult, but now that we really have a little bit more certainty on how energy prices.
Shake out next year that we will be able to deliver improvement quarter by quarter.
Okay. Thanks.
And I think you mentioned one of the things.
Do you feel you can control obviously is the execution.
Internally and I was just wondering if.
I know, it's only been a couple of months, but do you feel you have.
The team in place.
To execute the strategy.
Mitra, absolutely I think we and again its all nine weeks and we have as you might imagine spend a lot of time together and I'm really very very pleased with the management team.
I think everybody is committed I think we have the right skill set in place.
And I have no doubt that this is the right team to kind of face the challenges, which are ahead of us and there is a lot of work we have to do but I think everybody is 100% committed and.
And I'm very very optimistic that we get this done.
Okay. Thanks.
The good thing.
Sorry.
And one of the things I just wanted to reiterate here is that.
We don't have a strategic problem with Clotfelter I think we have the right product portfolio. We are in the right businesses.
We need to really focus on execution.
And this is our main focus we need to execute and I think we have created a sense of urgency within the company I think everybody in the whole company knows what we need to do.
We have established accountability and I think so.
So I'm extremely optimistic that we are getting things done now and hopefully we'll see this in our quarter by quarter improvement.
Okay. Thanks.
And I think you've had success in terms of implementing higher selling prices to deal with the higher raw material costs and energy et cetera, just curious if youre seeing any slowdown.
The demand end market demand.
As a result.
A bit more about the inflationary environment.
Yes.
I mean I.
I think we have to differentiate a little bit if I look at the <unk> business I mean, we feel very confident I mean, we have implemented in the business.
Again like I mentioned in my remarks, <unk> is really the example, where we're looking at is that we need to really everything we are doing in L. A we need to kind of benchmark the other businesses and drive improvement in the other businesses I mean like I said, we know how to do it it's not that we have to reinvent the wheel we know.
How to do it so our OLED business is extremely strong we implemented further price increases which were necessary based on inflation and we haven't seen any big volume problems. There. So this is a pretty solid business and so it's a composite fibers is concerned we also already in September .
<unk>.
Pushed a lot of price increases through.
We have seen a little bit of weakness in volume here and there, but nothing significant.
Our biggest problem as I mentioned before is our <unk> business, but it's not just a problem of pricing. It's also a problem of operational excellence, which we are lagging in certain areas and where we have to get our.
Our cost structure and spun laced under control and this is what we're focused on right now.
Okay. Thanks.
Following up on that obviously margin improvement is certainly one of the big goals.
Pricing is certainly helping and I think you identified about $9 million to $10 million SG&A.
Auction.
By 2024, I'm, assuming that's probably a low hanging fruit.
And as you evaluate.
Additional cuts.
This is just sort of a forced take so to speak is that fair.
That's fair, Yes, again, what we did is we did it.
In depth analysis on our SG&A.
And I also wanted to kind of emphasize here. This is the $9 million to $10 million worth mentioning is on top of what the team already implemented before okay. After the acquisition of families well that's on top of it. So and this is actually we are already implementing this this is underway and that against the <unk>.
<unk> run rate, we'll achieve in 2024, so we will see a little bit of that already in 2022, we will see I would say.
50% of this in 2023, but then the full run rate will be in 2024.
And.
So we are doing this and then also all the other improvements, which we are implementing right now.
We'll see quarter by quarter improvement and there is something with which might take a little bit longer.
We are very confident that based on our performance in Q3. If you look at this with 2006 and now Q4. This is the base and from there on we should actually be able to improve our EBITDA quarter by quarter.
Okay. Thanks.
And as it relates to the cash liver ratio, obviously suspending the dividend.
A lot of cash in.
Potentially sales of noncore assets could be another source of cash infusion, but my sense is.
Looking at the improvement you expect for 2023.
You should be able to generate sufficient cash flow.
For improved working capital and potentially even debt reduction.
Is that it.
Yes, that's fair.
And as we look at the balance sheet I think net leverage went up to about five seven at the end of the quarter.
Should we sort of see that now has a peak heading into 2023.
Yes.
Mitra, we don't.
Not providing guidance anything past.
2022 at this point, but I think it's a fair assumption.
Expect the leverage for Q4 to be in the same range as where we are right now for Q3, but what I want to come back to is the point you brought up earlier, which is regarding cash collaboration I think that is a significant lever that we have at our disposal right now Thomas talked about the suspension of the dividend.
I talked about the $10 million reduction in our capital spending relative to our previous guidance.
Working capital initiatives, absolutely going after past dues tightening up inventory tightening up payment terms. These are all of the initiatives that we're going to be going after which well not only kind of allow us to generate more free cash flow, but will also be put toward paying down debt with that.
It should also be a direct improvement to our leverage so we're going to approach. This from both sides right Thomas Bach talked about the kind of the EBITDA side of the house, which is the initiatives around pricing cost reduction.
Sure.
Portfolio review of non core assets and so on and then we're going to hit it from the other side.
On capital allocation on working capital and any other uses of cash that will allow us to pay down debt.
Okay, no that sounds great.
And I know there was a goodwill impairment charge in.
In the quarter, just curious obviously with turnaround.
A lot of moving parts right now, but should we anticipate any more sort of one time items.
Once we hit it.
<unk>.
No matter, we took a pretty holistic view.
As we assessed the that.
The <unk> business.
We do this every year from an impairment standpoint anyway.
Was even inside of the 12 month period of the acquisition, we felt that as we looked at the forward looking picture for spend less and where the performance has been this was the appropriate thing to do and when we ran that valuation.
Basically cleared out all of the goodwill which is what we.
Took a charge on for this quarter, but we don't expect unless there is any kind of portfolio rebalancing or capacity rebalancing that may be necessitated out of the operational reviews that Thomas was talking about.
We don't expect any additional impairment coming out of this fund this business for the near future.
Okay, and then just some final questions on the segments.
If you look at air laid materials I think you mentioned.
Are you still seeing strong customer demand, but you had some weakness in similar lines I take it that's more just a difficult year ago comps.
Versus anything else.
Yes, I would agree with that mature correct.
And on the composites LIBOR as I noted yet yes.
No no no. Yes, you are right because 2021 was a very different timeframe as it relates to energy inflation and so on so some of that year over year comp that you see in the slides related to.
Product categories and financial performance also has to do with with the comparison point being in a very different economic backdrop than where we are today in 2022.
Right right.
I know on the composite fiber segment with walk up or being down definitely sanctions driven or.
Impacted by the Russia, Ukraine conflict, but in terms of the softness you saw in some of the other lines.
Is there a question there.
The price increases may be starting to have an impact on demand or <unk>.
Not the case.
Again, just with difficult year ago comp.
Yes.
Yeah, Youre right Mitra I mean, we were pretty I mean, there was a lot of that.
We had a lot of pricing increases implemented in September and this is going on in our inflationary environment and there are certain pockets of the businesses, where it was easier to pass this on in other areas, where it's a little bit more complicated where we also have competition, but overall, if we look at the price increases we were able to pass.
Onto our customers versus the little softness we had on volumes. The softness was really I mean, there was not much volume loss now overall I would say certain areas of our composite fiber businesses is more vulnerable to overall economic.
<unk>.
The overall economic situation.
There's no doubt about this and we might see some some some weaknesses at the end of the future, but but again and I would like to reemphasize.
We are focusing on the things we can control and we are executing this rigorously on time with the sense of urgency we can't control the overall market, but I'm confident that if you.
Even in this <unk> environment. We're in we're seeing we will see improvements if things happen in the market, we have a huge recession in Europe .
Problems in the U S. Yes, this will impact our business, but we will be much better off than we are right, where we have been and we are actually ready for that okay. The question is always for US I mean, how much will be approved would be and just depends a lot on the overall market. There is no doubt about that but I think we need to get ready for that.
And as far as <unk> is concerned in composite fibers concerned I think we are in a particular spot.
And we can actually move on from here and spend less we need a little bit time to really also get our.
Cost situation order in August and this will take a little bit more time.
Okay.
There is a good a good part is and I just wanted to kind of.
The news, we're hearing out of the European energy side actually promising.
That will they will cap, especially in Germany, and we are very actually exported in Germany with a lot of factories over there that there will be a price cap for gas and power. When this will help tremendously.
And this will be in place for all of 2023 in the first quarter of 2024, so that will help a lot and I think that takes out certain volatility and it also helps us with our overall cost structure.
So that's actually positive news. Despite the fact that there is a looming recession I mean, yes.
Right. Okay, no that's great. Thanks, again for taking the questions.
Certainly look forward to getting an update on the next earnings call.
Okay. Yeah. Thank you Mitra alright, thank you micha.
Thank you and that does conclude our question and answer session.
I would now like to turn the conference back over to Thomas for any additional or closing remarks.
Okay. Yeah. Thank you everyone for spending time with us and I'm looking forward to being back end reporting about our Q4 earnings end of February of 2023, and then that would conclude our call today. Thank you.
Okay.
Thank you that does conclude today's teleconference. We do appreciate your participation you may now disconnect.
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Okay.
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