Clearwater Paper: From Downcycle to Green Shoots — A Pivot to Independence
With a new CRB partnership, price increases, and leaner mills, the paperboard maker bets on a cycle upturn.
CLW · Earnings Call · 2026-07-28
From Downcycle to Green Shoots
Clearwater Paper reported its second-quarter results on July 28, and while the headline numbers were ugly — adjusted EBITDA of -$8 million — the narrative is far more constructive. The company is seeing the first signs of a recovery in solid bleached sulfate (SBS) paperboard, and it is positioning itself to capture upside through cost discipline, price increases, and a new product line. “Our shipment volumes were up this quarter, with strong 8% year over year growth.” — Arsen S. Kitch, Chief Executive Officer · 2026-07-28 — despite a 9% decline in market pricing. This volume growth comes from foodservice and strategic customers, and management is confident it is not just pre-buying ahead of price hikes. “I do not view it as a fluke.” — Arsen S. Kitch, Chief Executive Officer · 2026-07-28 The company has been aggressive on costs: since 2024 it has removed more than $60 million of fixed costs, restructured its Cypress Bend, Arkansas facility (cutting ~20% of rolls with annual savings of $8-12 million), and reduced its annual maintenance outage estimate by roughly $10 million. Maintenance outage costs are now expected at $32-35 million for 2026, down from $45-50 million, by splitting the Augusta outage into two smaller events.
Independent Supplier, New Products
The most strategic move is the launch of CIRCA, a new recycled paperboard line manufactured by Greenpaper in Monterrey, Mexico. This is a distribution agreement that allows Clearwater to offer a complete substrate menu to independent converters.
We think having a more call it, wholesome solution by an independent supplier to customers has value in this in this market over the long haul.
The company already launched Velora, a lightweight board competing with FBB, and is exploring a low-cost CUK solution at Cypress Bend. Collaboration with Greenpaper gives Clearwater a CRB offering without channel conflict, a key differentiator versus integrated competitors.
The Price Cycle Turns
Clearwater announced a $60/ton price increase in June and a follow-on $60/ton increase in August. The RISI index has already reflected $40/ton on folding carton and $60/ton on cup. Management expects the June increase and RISI moves to translate into a “$50 million to $60 million annual improvement in EBITDA” — Arsen S. Kitch, Chief Executive Officer · 2026-07-28. That is a substantial swing against the current -$8 million quarterly EBITDA run rate. The company also expects SBS operating rates to rise from low 80s to over 90% by year end, supporting further price recovery.
Iran Conflict and Other Headwinds
Of course, not everything is rosy. The Iran conflict has raised chemical and transportation costs, with a ~$5 million sequential impact in Q2 and an expected $8-10 million cumulative impact in H2. Iran conflict is a recurring theme across the market, but Clearwater's exposure is modest (10% of purchases are global). Tariffs on Canadian imports could also have an impact, but management is cautious on predicting outcomes.
Balance Sheet and Capital Discipline
The company reduced net debt by $59 million in Q2, helped by tax refunds and insurance proceeds. Effective net cash improved to -$326 million from -$317 million in Q1, a $59 million reduction. Management reaffirms positive free cash flow for 2026, with working capital improvements of $20-30 million. Capital expenditures are guided to $65-75 million, and they have ample liquidity above historical averages. The debt rating downgrade from Moody's is a headwind for future refinancing, but they are working to extend maturities before facilities become current. From the prior call, the tone has shifted dramatically. In April, management said “We intend to run the mill at reduced operating rates until industry conditions improve.” — Arsen Kitch, President and Chief Executive Officer · 2026-04-28 Now they are sold out and raising prices. “We have been balancing supply and demand over the last year or two, so that is not new news for us.” — Arsen Kitch, President and Chief Executive Officer · 2026-02-18 The confidence is building.
What to Watch
The key swing factors are the pace of RISI index flow-through, success of the CIRCA ramp, and the durability of volume growth. Given the 46% rally in the last 90 days, the market is already pricing in a recovery. But with margins still negative and a long runway to the 13-14% cycle EBITDA margin target, Clearwater has significant operating leverage to the upside.