Tissue World Magazine
Alexandra Stuthridge, Technical Business Manager, BioProducts Institute (BPI)

(PPI Pulp & Paper Week) – Four tissue paper producers in North America reported mostly flat pricing for the first quarter vs their levels in first quarter 2012.

North America’s second and third largest tissue paper producers, Kimberly-Clark (K-C) and Procter & Gamble (P&G), reported pricing gains in the quarter of 1% and 2%, respectively.

‚Ä®‚Ä®K-C’s gain is for consumer tissue; P&G’s for a mixture of its consumer diaper and tissue businesses, so it’s unclear what the average was for tissue.

Clearwater Paper’s average for first quarter was down 0.4% because of a 2.6% decline in non-retail pricing “caused by lower machine-glazed and contract manufacturing pricing,” the company reported.‚Ä®‚Ä®Clearwater is the second largest private label supplier in North America.

Small-capacity producer Orchids Paper Products reported a 1% price decline, quarter-over-quarter.

‘Mixed bag’ for CLW.‚Ä®Clearwater Paper (CLW) president and chief executive Linda Massman said first-quarter tissue performance was a “mixed bag,” and cited the “complexity and rebalancing (of) the network as our new customers came online, coupled with the low inventories and [the introduction of through-air-dried TAD] bath tissue were more challenging than I think could have been anticipated.”

Clearwater started up a new TAD machine in Shelby, NC, at the end of last year and also upgraded a TAD PM in Las Vegas to produce bathroom tissue.

Massman told analysts based on a Seeking Alpha transcript of the firm’s earnings call this week that the company was working to fix the operational issues by “getting our mix of inventory back to healthy operational levels, reducing purchases of external paper, minimising paper machine changeovers wherever we can, and prioritising customer service related decisions.”

CFO John Hertz said “near-term customer demand for conventional bathroom tissue outstripped our ability to efficiently produce and transport it, which gave rise to the cost pressure that we experienced in the quarter.”

The Shelby TAD produced 13,000 tonnes in the quarter, in line with expectations for 55,000 tonnes this year and 70,000 by first quarter 2015, the company said.

The company shipped 94,000 cases in the quarter of TAD bathroom tissue, Hertz said. He said the company expected to ship about 18,000 to 20,000 tonnes and four million to five million cases in 2013.

Clearwater’s consumer product sales were $285 million, up 2% vs fourth quarter sales. Retail grew 8% primarily in bathroom tissue and non-retail declined 7%, Hertz said. Retail price per tonne declined 2% vs the fourth quarter and non-retail fell 1%.

Massman said Clearwater also announced a 1 May increase for its tissue and machine-glazed parent rolls.
Cost cut focus for P&G.‚Ä®&G’s diaper and tissue family/baby care unit increased sales by 3% in its fiscal quarter through March. Overall, 20% of P&G’s first quarter sales totaling $4.27 billion was from baby/family care. The unit’s share of company operating earnings was 28% ($939 million).

P&G remained steadfast about cutting costs, executives told analysts this week.

“We are on track to deliver more than $1.2 billion in savings (by the end of June),” CFO Jon Moeller told analysts, based on a Seeking Alpha transcript of the company’s earnings call. “Our efforts in this area include a targeted 5% net productivity increase across our manufacturing operations, even as we add new manufacturing capacity.”

Moeller said P&G is “shifting a greater portion of media spending to digital. This offers a higher return on investment. We’re also making good progress on cost savings in non-media marketing spending.”

K-C Cottonelle gain.‚Ä®C reported gaining Cottonelle business in the quarter from a competitor, but president/CEO Thomas Falk didn’t expect the increased volume to remain for the rest of this year.

Falk also said that K-C “is not stopping at (a consumer tissue margin of) 15%.” He told analysts that the company expects to grow in flushable wipes that will be launched in North America after a “terrific launch in the UK” and “we are starting to look at other things that we can do with our great tissue brands that bring more margin and revenue into the category‚ÄĚ.