Clearwater Paper Q3 EBITDA Rises; Q4 Outlook at $10M-$20M

Clearwater Paper Corp. (NYSE: CLW) reported higher third-quarter adjusted EBITDA despite lower sales, as fixed-cost reductions and lower selling, general and administrative expenses offset weaker paperboard pricing and production volumes. The company expects fourth-quarter adjusted EBITDA of $10 million to $20 million, reflecting seasonal shipment declines, further disruption at its Augusta mill and planned maintenance.

Net sales from continuing operations totaled $384.9 million for the quarter ended Sept. 30, 2026, down from $399.0 million a year earlier but up from $374.8 million in the second quarter. The company recorded a GAAP loss from continuing operations of $1.6 million, compared with losses of $53.9 million in the prior-year quarter and $21.5 million in the preceding quarter. The latest result included $13 million of insurance proceeds on a tax-adjusted basis.

Adjusted EBITDA from continuing operations increased to $24.4 million from $17.8 million a year earlier, within Clearwater’s stated range of $20 million to $30 million. Adjusted EBITDA margin rose to 6.3% from 4.5%. On an adjusted basis, the company reported a continuing-operations net loss of $3.7 million, or $0.23 per diluted share, compared with an adjusted loss of $8.2 million, or $0.51 per share, in the third quarter of 2025.

Lower market pricing for paperboard and pulp reduced the year-over-year EBITDA comparison, while lower production volumes also weighed on results. Those pressures were more than offset by cost and operational factors, including the timing of the Lewiston outage and cost-reduction measures. SG&A expense declined to 5.2% of sales from 6.2% a year earlier. An operational disruption at Augusta was offset by an RWI reimbursement, according to the presentation.

Pricing improves sequentially as volumes decline

Paperboard sales volume fell 1% from the prior-year period and 2% from the second quarter to 322,265 tons. Production volume declined to 307,749 tons from 319,615 tons a year earlier and 316,267 tons in the second quarter, reflecting production disruptions.

The average paperboard sales price was $1,111 per ton, below $1,160 a year earlier but $34 higher than in the second quarter. Clearwater said about half of its volume is linked to RISI price indexes, with price changes potentially taking several quarters to flow through its results. Industry-reported folding-carton and cup pricing increased by $60 per ton in 2026.

Food-service sales decreased to $162.6 million from $182.0 million a year earlier, while folding-carton sales were broadly unchanged at $143.5 million. Sheeting and distribution generated $38.0 million, and pulp and other sales rose to $40.7 million from $36.1 million. Clearwater described demand and backlogs for extruded products as solid.

The company’s industry outlook calls for roughly 1% growth in solid bleached sulfate paperboard demand in 2026. Based on industry data and company estimates, about 800,000 tons of SBS production had been removed through the year to date, and operating rates were projected to rise above 90% by year-end. These projections remain dependent on supply, demand and broader market conditions.

Fourth-quarter costs to offset pricing benefits

Clearwater expects fourth-quarter adjusted EBITDA of $10 million to $20 million. The outlook incorporates lower seasonal shipments and additional effects from Augusta mill disruptions in early October, as well as $5 million to $7 million of planned major maintenance at the Cypress Bend mill.

Management also expects $5 million to $6 million of seasonal energy increases and additional war-related costs, primarily in transportation. Those pressures are expected to be partly offset by an $8 million to $12 million benefit from price increases.

For full-year 2026, the company assumes revenue of approximately $1.5 billion. Recently announced price increases are expected to contribute $15 million to $20 million, while carryover price reductions from 2025 are expected to reduce results by about $70 million. Productivity and restructuring actions are expected to mostly offset higher costs, including an estimated $28 million to $32 million of war-related effects.

Full-year major maintenance costs are projected at $27 million to $29 million for the Lewiston and Cypress Bend outages. Capital expenditures are expected to total $55 million to $60 million, with capital associated with the Augusta outage moved to 2027. Clearwater is also targeting a $25 million to $30 million improvement in net working capital, primarily through inventory reductions.

Debt reduction and product expansion remain priorities

Clearwater ended the quarter with net leverage of 3.2 times and liquidity of $221 million. Net debt fell by $56 million during the first nine months of 2026 to $260.7 million, supported by working-capital initiatives, an insurance recovery and a tax refund. The company also refinanced debt and extended maturities to 2031.

Longer term, Clearwater is targeting an adjusted EBITDA margin of 13% to 14% across the industry cycle and free-cash-flow conversion of 40% to 50%, or more than $100 million annually. These are strategic targets rather than near-term forecasts. Capital-allocation priorities include maintaining assets, reducing leverage toward a cross-cycle target of one to two times, evaluating strategic transactions and repurchasing shares under its existing authorization.

The company is also evaluating internal and external options to broaden its paperboard portfolio for North American converters. Current initiatives include post-consumer recycled content, the Velora lightweight folding-carton product, the Circa recycled paperboard grade and certified compostable plate material. Clearwater expects to launch an unbleached paperboard grade by year-end 2026 and continues to develop poly-free coatings and barriers.

Key uncertainties include paperboard pricing pressure, demand changes, mill and labor disruptions, input and transportation costs, execution of the Augusta integration, and the company’s ability to complete efficiency and capital projects. Clearwater also cited environmental liabilities and litigation, including PFAS-related claims involving the Augusta facility, as well as debt-service, cybersecurity and regulatory risks.